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| A standard JP Morgan Building |
Adam Smith stated that "it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." Right now,
JP Morgan feels its interest to profit requires job cuts, a lot of job cuts.
JP Morgan Chase and Co., whose US branch network is surpassed only by Wells Fargo and Co's, has recently announced its plan to cut about 3000 jobs during 2013, which is almost 1.5% of its consumer bank workforce. The great United States bank has also predicted that about 17,000 jobs would be cut by 2014. Obviously, the current economic conditions are not exactly ideal as before, and even JP Morgan needs to make a few adjustments in order to profit. The Chicago Tribute has stated that in order to increase its profits and add more branches, JP Morgan will try to add more salespeople to support good and services that will boost revenue.
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| Jobs are being cut ... literally |
RBC Capital Market banking analyst Gerard Cassidy has
noted that "The industry has elevated costs because of the recession and the financial crisis." And as the crisis has slowly been improving, "the big banks don't need those people anymore. As JP Morgan moves to cut jobs to earn about $3 billion in savings, that loss will not prove beneficial to job seekers at this time. Though JP Morgan is not exactly doing badly, the current economic situation has flattened revenue as banking and trading profits are being squeezed.
JP Morgan will reveal more details in time. As of now,
The New York Times has reported that "Jamie Dimon
, the chief executive of JP Morgan Chase, vowed on Tuesday to change how the bank deals with Internet-based payday lenders that automatically withdraw payments from borrowers’ checking accounts. "
Do you think
JP Morgan is making a wise move in the long-run? Does this signal further economic headaches for President Obama to handle? Will other banks follow in JP Morgan's footsteps and announce further cuts as well? Obviously, Adam Smith wasn't kidding when he said the Wealth of Nations was not a blueprint for Utopia.
3 comments:
I feel like it's wrong for the banks to layoff thousands when they are also making a profit. But I also feel that since JP Morgan Chase is a bank, they need more money to be able to loan out to consumers to hopefully reinvigorate the economy. Gaining more profits might actually bring down interest rates for most people as well. So in the long run, this may be a good decision, but it just looks pretty bad at the moment.
In response to Marvin's comment, I agree that it is probably selfish that JP Morgan Chase is laying off its workers to make a profit. However, this is similar to what Adam Smith was saying. He felt that individuals acting selfishly helped maintained a stable market system for the good of all. He said: "Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of." Theoretically, this is good in the long-run. Still, the world is very different from the days of British mercantilism. This Harvard paper sheds light on how Smith's ideas still influence today's economics.
I think that JP Morgan's decision may be good in the long run. As a private company, it is allowed to lay off workers in order to profit. Banks and other private companies are not non profits existing for the public good so it is justifiable to do what it takes to make money. As Adam Smith would say, they need profit so that they can accumulate capital which they can then use to expand their business, which would theoretically contribute to the public good. Of course, if they just sit on their profits then this would be where greed is not good.
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